Category: Ask Us

A look at San Francisco Bay Area housing affordability trends over time and how they intersect with real estate market corrections:

The 2008 San Francisco Bay Area real estate crash was not caused just by a local affordability crisis: It was triggered by macro-economic events in financial markets which affected real estate markets across the country. It’s important to note that in the past, major corrections to Bay Area home prices did not occur in isolation, but parallel to national economic events. Ongoing speculation on local “bubbles” often neglect to remember this.

Still, dwindling affordability is certainly a symptom of overheating, of a market being pushed perhaps too high. Looking at the chart above, it’s interesting to note that the markets of all Bay Area counties hit similar and historic lows at previous market peaks in 2006-2007, i.e. the pressure that began in the San Francisco market spread out to pressurize surrounding markets until all the areas bottomed out in affordability. This suggests that one factor or symptom of a correction, is not just a feverish San Francisco market, but that buyers can’t find affordable options anywhere in the area. We are certainly seeing that radiating pressure on home prices occurring now, starting in San Francisco and San Mateo (Silicon Valley) and surging out to all points of the compass.

San Francisco, with a Housing Affordability Index (HAI) reading of 10% is about 2% above its all-time historic low in Q3 2007, but affordability in most other Bay Area counties, while generally declining, still remain significantly above their previous lows. By this measure, the situation we saw in 2007-2008 has not yet been replicated.

Significant increases in mortgage interest rates would affect affordability quickly and dramatically, as interest rates along with, of course, housing prices and household incomes, play the dominant roles in this calculation.

Note that Affordability ratios are just one relatively blunt measuring tool, and there are certainly other factors at play affecting our real estate market: local (high-tech boom; surging population, employment and wealth; inadequate housing supply, rental rates, etc.), national (financial markets, unemployment rates, consumer confidence, etc.) and, nowadays, even international economic factors (such as recent events in the Chinese stock markets and the EU).

Information on the methodology behind the California Association of Realtors’ HAI can be found here.

Speaking of financial markets, we decided to take a look at how the recent volatility played out in the S&P 500 and the Shanghai stock indices. These indices are constantly fluctuating, but the general picture has not altered significantly since we graphed this in early November:

Step 2 – Get New Listings Fed To You Automatically (via Email or Text)

Our market moves fast, and so must you. You might have thought the next step would be to contact a Realtor. You can certainly do this now, but it’s not necessary. You can preview all the property you want yourself, right here online, and very soon we’ll show you just how easy it is to get dialed in to seeing these homes on your own.

So how do you get these new listings “fed” to you?a. Get dialed into MLS. Contact us with your criteria (desired # of beds, baths, parking spaces, size, price, location, and your email) and we can set you up with behind the scenes access to what we call our “Client Portal”. You’ll receive new listings to your inbox the second they hit MLS, you can save, reject, and track what properties are selling for (very important), and you can request showings from within the application. This way, you’ll also be on our radar for potential off market matches should any pop up.b. A different variation of the same theme, but without the need to contact anyone. It’s called MyZephyr, and you can get alerts, save, search, and track property from the comfort of your own home. The only downfall to this, is that we have so many people in this system using this tool, we simply do not have time to track your activity (some might consider this a plus), and therefore we probably won’t know who you are should something great pop up “not on MLS”.c. Browse MLS: Even less intrusive, and way more stealth, MLS is actually there and available to you 24/7. No really…it is.d. Redfin. Hands down the best way to search property if you’re not searching with one of the tools provided above. It’s a great site, with a ton of great info, and incredibly accurate data. If you don’t choose a. or b. above, use this over option c. It’s better.e. Trulia, Zillow, or Realtor.com. These three are crap, inaccurate, and not worth your time. The only saving grace is Trulia’s community or “Voices” area. There is some good info to be found there. Zillow Zestimates are awful, and when we’re sipping a Cerveza after we hand you the keys to your house, we’ll make sure the beers are on you if you mention one word about “but the Zestimate said it’s worth this.”

What about all of the “off market” listings that are becoming so popular, and how do you get clued in to them?a. PocketListings.net: It’s growing, more agents are using it, and you (the buyer) can certainly browse it for “off market” opportunities. You can follow PocketListings on Twitter for instant notification of new listings, and you can even have your “buyer need” added to it…but for that you’ll need a Realtor.b. A Realtor: At this stage, there is no way around it, and it’s the very reason Pocket Listings are growing in popularity…Realtors are taking back the control of their listings, and they’re doing this to keep themselves relevant. Listing aggregators like Zillow, Trulia, Redfin, and Realtor.com don’t always portray the most accurate data, agent contact info, pictures, and local information. The system needs to change, and Realtors are taking it back. And guess what? A human is actually a really useful tool in the home searching process and if you find the right one, said human can provide a wealth of accurate and opinionated information. If you want off market opportunities, and want to truly feel like you’re getting in the loop of what most people aren’t, you need a Realtor. If you want to just browse MLS, PocketListings.net, and go at your own pace, you can still get by without contacting one.

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I used to do a thing a long time ago called “Stump the Stammtisch“, where readers could write in and my (then) panel of experts would share their answers in the comments below (Think Trulia Voices, before Trulia existed). I changed it up to “Ask Us“, and received considerable response to many a question. But then, I got busy with life.

Let’s see if the community out there would like to take a stab at answering this question, and see if I can get the Stammtisch going again. If you’d like to be in the Stammtisch, it’s simple. Just answer the question, link to your website (or remain anonymous) and continue to answer any questions we throw up in the future. Build a track record as an expert, someone that cares to answer questions for complete strangers, and you’re in.

That said, my colleague at Zephyr Real Estate would appreciate any feedback you could provide in the comments below…

If a shooting occurred where the victim died and it was 200m from the subject property would you expect to see, in this current market, a decrease in value, and if so what arbitrary number would you assign to the decrease.

My reply is that it’s going to have some type of an effect on the resale of the property, but “in this current market”, I’d be willing to bet for as many buyers that are out there that would be deeply bothered by such an event, there are just as many that will see this as an opportunity, which, in our assbackwards real estate market, could actually increase the number of potential buyers to a property and actually drive the price up! I would imagine if this is in an area where homicides are common (that would suck) it will effect the price less than if it were in an area that would normally be considered safer (Bayview Hunter’s Point versus Pacific Heights for example.) My arbitrary number on the decrease in value: $0, it would be a wash…it will bother some, and not bother others.

-My clients and I bid on a house at shotwell and 24th a year and a half ago where three guys had been shot on Friday night, bids due Monday.
It had 17 offers, three all cash, and went $200k over asking (we bid $150k over)
-My first Zephyr sale was under similar circumstances. The house in question was located in the Excelsior, listed for $599K in Escrow for $619K, there was a shooting within a few feet of the house so the first buyers dropped out. My buyers jumped in at the $615K and did not care because they were from England, lived in the Mission and were thrilled to get the house.
-A few years ago we had a listing in the Mission where a guy died on the sidewalk right in front of the house next door after being shot around the corner on 24th St., running down the block and collapsing about six inches from the edge of our clients’ house. This all happened about two or three weeks (something like that) before we came on the market.We disclosed it and everyone who asked pretty much shrugged their shoulders, and said, “Well, it’s the Mission.” I don’t remember how many offers we got but it sold for over asking to a single mom with an elementary-school-age kid.If your listing is in a neighborhood where stuff like this doesn’t usually happen, you will probably get a different answer but if it’s the Mission or equivalent, it might not make a big difference.
-I don’t see that as a big value “decreaser”, depending on the area and especially if the victim and perp knew each other so it wasn’t a random act…..

I love your blog. I just moved here from NYC a week ago and it’s been an invaluable resource.

I just found a rental that I love, [removed]. Gorgeous views, built in 1939 or so. Problem is, a friend from SF pointed out that it’s a “downhill home.” (I’d never heard the term before.) It’s cut into the face of the hill, but it’s partly on those stilt kind of things. The landlord says the hill is safe and the place was “thoroughly inspected” when he bought it…but he owns the place and needs a tenant, after all. :)

I’d love to rent it but want some reassurance that the thing won’t fall down the hill at some point. Like, if there’s a quake. Do renters ever do seismic checks here? How can I find out if this place really is safe? I don’t mind paying myself if the inspector fee is reasonable.

I don’t handle rentals, so I’m not one to speak with 100% certainty. I would imagine that you could do any kind of inspection you wanted as long as it doesn’t cost the owner anything.

The fact is, if a big quake hits SF, who the heck knows what will happen. A big rain might be more likely, and more of a concern….landslide.

My advice would be to go ahead and inspect if it will make you comfortable, the owner is okay with it, and you have the time to do so. But, don’t expect any person to tell you without a shadow of doubt that the home is 100% safe. You can thank the litigious society we live in for that.

When you’re ready to buy, let me know! If you have any money for down payment at all, I would HIGHLY recommend buying. Prices and interest rates are crazy low, and your payments would likely be less than rent.

Assume a house burned down and a firefighter died a few days later from his injuries.
Same for a contractor falling from the roof or any other work related accident on the property.
What are the consequences regarding the disclosures of a subsequent sale?

Please do not discuss the specifics of a recent event/specific house, I’m only interested in the “what if that happens to my own house” – such as
does this qualify for a death in said property?
As a Realtor, would you advise to check or not the box?
How would you disclose this information?

What are the others aspects that you’d like you warn home owners (such as hiring only fully insured roof workers)?

I think this opens up the forum to a larger debate as to whether a death that came later from an accident on the property could be classified as a death “on” the property. I leave that to attorneys, but would certainly disclose any and all pertinent information. You see the pattern here? Disclose, disclose, disclose!

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Remember that fun little $8000 tax credit the government was handing out to boost our economy? Well, what if you can’t stay in your home long enough to avoid paying it back?

If you were a first time homeowner in California, and received the $8,000 credit. To keep from having to pay it back, one is supposed to live in that home for three years. What if that house goes into foreclosure? (Loss of job, injury that prevents work, etc.) If one is not able to make the payments, how is one expected to repay $8,000?

My suggestion would be to talk to a Certified Public Accountant (CPA), and try to sell the property. If you don’t want to put it on MLS, you can try PocketListings.net. Hopefully the property value hasn’t decreased too much and you wouldn’t have to do a short sale or foreclose on it, but it sounds unlikely.

This reader is located in Clear Lake, California, as is the property. Why is that important? As I said to the reader, “It’s a lot easier to sell a home in San Francisco than it is in Clear Lake.”

The reader’s reply,

“Tell me about it. When I first moved here I had a lady come up to me and say, why would I move here! I told her I liked it at first, but now I want out. She said “Once you move here, you don’t never leave.” It made the hair stand up on my arms. What a scary thought! Yikes!

I am pretty sure the value of my home has reduced however the property taxes have not reduced. Can you help me with this process and if so what is your typical fee for this service. My home is in San Francisco.

My reply:

Hello,

Thank you for your email and contacting me. I have touched on this subject before on theFrontSteps.com. A quick search in the search bar on top right for “Property Taxes” will get you these results: CLICK HERE

Why don’t you start by looking through that information and then letting me know what else I can do.

I do not necessarily “help” beyond providing advice. You will have to go down the road on your own, but I am happy to help where I can, and as you can see I’ve been asked this question a few times.

My fee is asking you to tell your friends both about me and theFrontSteps.com, and remembering to give me the first opportunity to represent you, and your friends/family, in any real estate purchases in and around San Francisco.

I found your blog while researching San Francisco. My husband and I presently live in Texas, but want to move to San Francisco.
We have two dogs (bulldog, and Labradoodle). We would love to have a fireplace, great view, outside balcony, and a place for one vehicle. Please don’t laugh but we would like to spend 250K to a max of 400K.
Now that you have hopefully gotten up off the floor, is this possible?
We will arrive in San Francisco April 7th -10th, to view property.
We are also open to areas that surround San Francisco, (Sausalito, Oakland, Berkeley).
I hope you are someone you know could help us.

This email came to me just the other day, and I’ve combed the MLS, PocketListings, and all other sources of property listing information since, and gotta say…I’m surprised there are so many choices! It used to be laughable to search in this range, but not anymore. Now, you might not get that great view, outside balcony (is there such thing as an inside one ;-) ), and parking, but you can get something! That’s for sure.

So if you, or anybody you know, is in the market for a sub $400,000 property in the greater San Francisco Bay Area, you might want to give your mortgage broker a call, because your day may have finally come!

Being a Realtor here at Zephyr Real Estate, we are constantly hit up with questions from colleagues trying to find answers for their clients. (Funny how we’re expected to know everything and have all the answers outside of what a quick Google, Yahoo!, or Bing search might turn up for you (just sayin’)). Since we continue to get every question under the sun, some more intriguing than others, we’re going to start sharing some of them with you in hopes that you might be able to provide some additional “local” insight. This one came across the intranet today, and maybe someone out there has the answer:

I have clients who are interested in a property in Midtown Terrace but are concerned about the “radiation” from the towers on Twin Peaks. Is there a professional resource to whom I can direct her so that someone with some credentials can speak to her about this issue?

Something interesting that we noticed….The original address of the tower was 250 Palo Alto Ave, so perhaps you’d also like to know that 206 Palo Alto Avenue is currently for sale, but “not on MLS“.
Just a reminder, that although we tend to know everything, it’s real estate that we really know, and I personally would be happy to get you a private tour of 206 Palo Alto Ave…just ask. ;-)